Risk Management Tips For Novice Traders

by: Mohammad Hafiz
risk management

As we already know, proper money management and risk management can be your secrets of success. After you have defined your goals and selected a strategy that suits your psychology, create risk management rules to see how much funds will be at risk and how much money will you be able to earn with the deals.

Okay, you can think: “Why is it so important? Maybe I’ll do it intuitively? Aren’t there some Forex trading tips on how to make it easier?”. I want to answer these questions before you made a series of mistakes and faced losses. It’s really important. And here is the reason:

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The more risk you take, the more money you lose.
(Surely, you can win for a couple of times, and go ‘all in’, but it unlikely to work constantly).

Newbies who come to the market are often seduced by large leverage, blinded by the probability of a great win, so their focus is kept off the drawbacks completely. Such mindset can be presented in the next line: “Large risk is what will bring you the big bucks”. But unfortunately, it’s wrong.

True risk management is essential for saving and growing your capital. And there no empires built in a couple of days, no great capitals made by a couple of trades (there are exceptions, but they are 0.001% from 100%), no great financiers who have become professionals overnight.

risk management

I’ve made some tips on working on Forex for you to see that there is nothing impossible and everything can be controlled in a certain sense.

Here are some Forex trading tips on how to improve your risk management and achieve more profit.

Control your losses

The first and the most important trading tip. Losses measuring doesn’t mean getting rid of them at all, still, you’ll be able to lose less. Figure out where to set your stop loss orders, calculate it and think about whether it’s a comfortable level for you. Don’t fall into a trap of moving a stop loss farther or setting it too tightly.

Use correct lot sizes

Of course, trading $10K with $300 on your depo and 1:200 leverage looks sweet. Different brokers can promise that you’ll double your funds in a couple of seconds. But in fact, it rarely works. Too big leverage can harm an account badly. Better start with small transactions or use lot calculators that will offer you not bad positions. Moreover, you won’t be strongly engaged in the process if you trade small orders.

Don’t overleverage

This point is similar to the previous one in some way. Don’t think that trading with a large leverage always leads to big profit. Surely, it’s a great instrument that may help enlarge your depo, but it’s tied to severe risk as well. The larger leverage you use, the more margin funds you can lose.

Better trade with a moderate leverage. It’s a useful feature, but has to be used very carefully.

Track your overall exposure

Here’s another handy Forex trading tip: don’t work with the same currencies. I mean if you go long on USD/CHF and short on EUR/USD with a lot on each pair, it will mean that you are buying 2 lots of USD. And if the US dollar falls, you’ll lose in both trades. Better choose some other currency, for example, GBP/EUR instead of EUR/USD.

Tame your greed

Don’t try to catch the market and squeeze it to the last penny. If it was so simple, someone would do it already. No one gets rich overnight. So, don’t aim at 100 pips per day and stick to your trading system.

You may use hedging and correlation techniques to protect your funds

I won’t tell you about these Forex trading techniques in this article, but you can read about them on the Internet or wait until I write a piece of material about these techniques. They shorten your risk and help to protect money. Maybe you’ve already tried to use them. Anyway, I want to warn you: such deals are difficult to close in profit. Still, you may lose less, if the market doesn’t move in your favor.

Know when to stop trading

Getting out the market too early or too late is never good. You either lose potential profit or lose your margin. You can use indicators or Price Action patterns in the Forex trading to know that it’s time for exciting. So, after some practice, you’ll be able to distinguish such moments intuitively. I’ve done it in such a way. 😉

The last and the very important Forex trading tip: always keep learning

Keep educating yourself and try to be a better trader with every closed trade. You will learn how to “feel” the money management system. It won’t seem so difficult after you work with it for some time. Its rules will become essential and understandable.


If you have read all these Forex trading tips and still have thoughts like “Hm… That looks nice but too difficult, maybe I’ll make a small $100 bucks deposit and try it without that boring things?”, I won’t stop you, but you are likely to lose. Forex is not a casino, so…

STOP gambling and START making business.

And don’t throw out the fact that any business needs a plan, calculations, and analysis. So does Forex. If you are on the way to understanding this fact, read my trading tips once more and make your own conclusions on how you will manage your risks here.

I hope that my profit making tips will be helpful for you. Always keep in mind that only you but no one else is responsible for your deposit. So try to trade your own money thoughtfully.

By the way, you can share my post with your friends on social media, maybe they are looking for trading tips too!

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